5 Safety management budgeting mistakes to avoid
As we approach the close of the year, it’s important for companies to start finalizing their next budgets. While you may have already convinced executives and managers of the benefits of your programs in terms of employee safety and the company’s financial success, it’s crucial to create a realistic budget to sustain them.
This holds true for small or newly formed companies. Simply put, an overly simplistic or poorly planned budget won’t suffice. Given that most businesses operate on narrow profit margins, it becomes necessary to meticulously consider every item intended for purchase. Avoiding these five safety budgeting pitfalls is essential not only to ensure budget approval but also to enable effective adherence throughout the year.
1. Underestimating your costs
How much will it truly cost for your training programs, inspections, repairs, and other initiatives? While it may be tempting to only consider the essentials, you must also factor in the time and labor required to divert employees from their regular duties to focus on safety-related tasks.
If you are relying on paper-based safety materials and manually replacing personal protective equipment (PPE) or repairing equipment, this will further hinder the efficiency of your safety management. Ensure you include these essential expenses in your budget before considering any optional programs or purchases.
2. Relying on unrealistic projections
In addition, it’s crucial to have a realistic understanding of your company’s projected revenue. Will production levels be on the rise in the coming year? Are previous clients returning to do business with you? Additionally, any potential delays or obstacles that may result in a lower-than-expected income must be considered. Decision-makers can’t approve a budget that fails to acknowledge these crucial factors.
3. Forgetting about cash flow
When planning your finances, it’s important to consider more than just yearly revenue. Unless your company operates with exceptionally high margins, the regular spending limits will be influenced by quarterly, monthly, and even weekly cash flow.
While you may have accounted for small daily expenses, it’s essential to determine when you will have the financial capacity to make significant replacements or conduct large-scale inspections, repairs, and training. Even if you have a general estimation of your annual income, adjusting your safety management programs and purchasing schedules becomes necessary to align with the cash flow situation.
4. Not taking taxes into account
While safety management rightly takes precedence in budgeting considerations, decision-makers must also take into account the remaining funds in the company’s coffers after tax liabilities. It’s important to have a clear understanding of the deductibility of each item on your budget. Furthermore, having a rough estimate of the company’s after-tax profit for the current year, and being aware of the executives’ goals for the upcoming year, is essential. These figures should be kept when assessing the impact of your department’s budget on the overall financial performance of the company.
5. Purchasing the wrong management tools
Managing incidents, investigations, audits, and training manually can quickly become a nightmare, but the use of appropriate safety software tools can greatly simplify your life. While these tools offer long-term return on investment (ROI), their expenses must be accounted for in your yearly budget.
Opting to individually purchase different tools for tasks such as material safety data sheet (MSDS) creation, training, and job hazard analysis (JSA) management can add up to tens of thousands of dollars annually. In contrast, our integrated solution is comprehensive and much more affordable. If your safety budget is already stretched thin, choosing the more cost-effective solution is a necessity you can’t overlook.
